Start with the price of the house and the percentage you want to put down

Your down payment is the cash you give the seller at closing. It comes straight from your own money, not from the loan. To figure out what you owe, multiply the purchase price by the percentage you plan to put down.

If a house costs $300,000 and you put down 20 percent, the math is $300,000 × 0.20 = $60,000. That $60,000 is your down payment. The lender then finances the remaining $240,000.

The percentage you choose matters because it changes how much you borrow, what your monthly payment will be, and whether you pay mortgage insurance—an extra monthly fee lenders charge when your down payment is less than 20 percent.

Key Takeaways

  • Down payment = purchase price × the percentage you choose (for example, 20 percent of $300,000 is $60,000).
  • Putting down less than 20 percent means you will pay mortgage insurance on top of your regular loan payment each month.
  • Your lender will tell you the minimum down payment they accept, which is often 3 to 5 percent for conventional loans.
  • The down payment does not include closing costs, which are separate fees that typically run 2 to 5 percent of the purchase price.
  • You can use online calculators to see how different down payment amounts change your monthly payment and total interest paid.

What down payment percentages actually mean

Down payment percentages are just shorthand for a fraction of the price. A 10 percent down payment means you pay one-tenth of the purchase price yourself. A 5 percent down payment means one-twentieth. The lower the percentage, the less cash you need upfront—but the more you borrow and the more interest you pay over time.

Common percentages are 3, 5, 10, 15, and 20 percent. Each one has a different effect on your loan. At 3 percent down on a $300,000 house, you pay $9,000 and borrow $291,000. At 20 percent down, you pay $60,000 and borrow $240,000. The difference in monthly payment can be $200 to $300, depending on the interest rate.

How mortgage insurance changes the real cost

Mortgage insurance (called PMI on conventional loans, or MIP on FHA loans) is a monthly fee the lender charges when you put down less than 20 percent. It protects the lender if you stop paying, but you pay for it. The cost is usually 0.5 to 1.5 percent of your loan amount per year, split into monthly payments.

On a $291,000 loan (the 3 percent down example), mortgage insurance might add $120 to $360 per month. That fee stays on your bill until you have paid down the loan enough that you own 20 percent of the house, or until you refinance. This is why a smaller down payment can cost you thousands in extra interest and insurance over the life of the loan, even though it feels cheaper at the start.

Some loan types let you remove mortgage insurance once you reach 20 percent equity. Others do not. Ask your lender which rule applies to the loan you are considering.

Closing costs are separate from your down payment

Many people confuse down payment with closing costs. They are different. Your down payment is what you give the seller. Closing costs are fees you pay to the lender, the title company, the appraiser, and other parties involved in the sale. They typically run 2 to 5 percent of the purchase price.

On a $300,000 house, closing costs might be $6,000 to $15,000. You need to save for both the down payment and the closing costs. If you put down 20 percent ($60,000) and closing costs are $9,000, you need $69,000 in cash before you can close.

Some lenders let you roll closing costs into the loan, which means you borrow the money instead of paying it upfront. Ask whether that option is available and what interest rate you would pay on the borrowed amount.

How to find out what your lender requires

Different lenders have different minimum down payments. A conventional loan (the most common type) often requires 3 to 5 percent down, though some lenders go lower. FHA loans, which are backed by the federal government, allow 3.5 percent down. VA loans (for military members and veterans) often require zero down. USDA loans (for rural areas) also often require zero down.

Before you calculate anything, talk to a lender or mortgage broker. They will tell you what minimum they accept, what interest rate you would get at different down payment levels, and what your monthly payment would be. This conversation is free and does not lock you into anything.

The lender will also check your credit score and income to see what loan size they will approve you for. Your down payment is only part of the picture—they also want to know that you can afford the monthly payment.

Using a down payment calculator to compare options

Online calculators let you enter the house price, down payment percentage, interest rate, and loan term (usually 30 years), and they show you the monthly payment and total interest paid. This helps you see the real cost of choosing 5 percent down versus 10 percent versus 20 percent.

Most calculators also show you the mortgage insurance cost if your down payment is below 20 percent. This is the number that surprises people—seeing the insurance fee added to the payment every month makes the true cost of a smaller down payment clear.

You can find these calculators on most lender websites, on Bankrate, on the Consumer Financial Protection Bureau website, or through a simple search. The math is the same everywhere, so use whichever one you find easiest to read.

Saving for a down payment when you do not have the full amount

If you cannot save 20 percent, you have options. You can put down 3 to 10 percent and pay mortgage insurance until you reach 20 percent equity. You can ask the seller to cover some of your closing costs, which frees up more of your savings for the down payment. You can look into first-time buyer programs in your state or city, which sometimes offer down payment help or lower interest rates.

Some employers offer down payment assistance as part of their benefits package. Some nonprofits offer grants or low-interest loans for down payments. Family members can also gift you money for a down payment, though the lender will ask where the money came from and may require a letter saying it is a gift, not a loan you have to repay.

The key is to be honest with your lender about where your down payment money comes from. Lenders have rules about this, and breaking them can delay closing or kill the deal.

Frequently Asked Questions

What if I only have 5 percent saved but the house costs $300,000?

You would pay $15,000 down and borrow $285,000. You would also pay mortgage insurance each month until you own 20 percent of the house. The insurance adds $140 to $425 per month depending on the lender and loan type. You can still buy the house, but your total monthly payment will be higher than if you had saved 20 percent.

Can I use a gift from family for my down payment?

Yes, but the lender will ask for proof. You typically need a letter from the family member saying the money is a gift and not a loan you have to repay. The lender wants to know you are not borrowing money to make the down payment, because that would increase your total debt.

Does the down payment percentage affect the interest rate I get?

Usually yes. Borrowers who put down 20 percent or more often get a lower interest rate than those who put down 5 percent, because the lender sees less risk. The difference can be 0.25 to 0.5 percent, which adds up to thousands of dollars over 30 years. Ask your lender what rate you would get at different down payment levels.

What happens if I put down more than 20 percent?

You avoid mortgage insurance and borrow less money, so your monthly payment is lower and you pay less total interest. The tradeoff is that you use more of your savings upfront, which means less money for emergencies or other goals. Some people prefer to put down 20 percent and invest the rest instead of putting down 30 or 40 percent.

Can I remove mortgage insurance after I pay it for a while?

On conventional loans, yes—once you have paid the loan down to 80 percent of the original house value, you can ask the lender to remove it. On FHA loans, the rules are stricter and depend on when you took out the loan and how much you put down. Ask your lender what the removal rules are for your specific loan.